Hi I am an NRI since last 3 years. I have a company here in Dubai in which I am 25% shareholder, and I also have a company in India since last 10 years in which I am shareholder of 48%. The company of Dubai has to bill the company of India for services rendered. The service rendered is that the Indian company has a zerodha account for its investments and is using robotics based software of the dubai company. The usage and service charges are to be billed. Is there any additional compliance which needs to be done?
The major compliance will be following
a) Transfer pricing since both companies will fall under associates so need to demonstrate that transaction value was at arms length
b) Indian company will be subject to GST under Reverse charge for this services
c) Need to check for the agreement generated for the transaction if its falling under Fees for technical service or royalty towards use of software or license than withholding tax will also apply in India
Transfer Pricing: Ensure billing between the Dubai and Indian companies is at an arm's length price to comply with transfer pricing regulations in both countries.
GST in India: The Indian company must pay GST under the Reverse Charge Mechanism for services received from Dubai.
Withholding Tax: If the services qualify as technical services or royalties, the Indian company may need to deduct withholding tax as per India-UAE DTAA and Indian tax laws.
Documentation: Maintain a detailed agreement that outlines the nature of services, pricing, and payment terms for compliance and tax assessment purposes.
For detailed, personalized advice, consider a phone consultancy.
Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.
Thank you.
Shubham Goyal
On Indian Co., tax implications under the Income tax Act and GST would arise
Under Income tax Act, provisions of transfer pricing (TP) and witholding taxes would apply on such remittance
- TP provisions are applicable to associated enterprises. As you are holding less than 26% of the share capital in the Dubai Co., TP provisions would not be applicable considering the above parameter only. Assuming you are having less than 26% of the voting rights in the Dubai Co. Need more details to determine the relation of associated enterprise such as who is holding the remaining 75% shareholding in the Dubai Co., authority to appoint directors in both the Companies, dependency of business activities etc.
- Payment for right to use a software is not a royalty. Plz share EULA for precise reply
- Before making foreign remittance, file Form 15CA, 15CB, Form A2 and copy of invoice with the banker
Under GST
- It is an import of services and Indian Co. would be liable to pay GST on reverse charge mechanism. The Indian Co. is eligible to take ITC (input tax credit) of GST paid on such import of services
For detailed discussion you may opt for phone consultation
Hello since both Indian and UAE company could be considered as related entities I would recommend to check applicability of transfer pricing in India as well as UAE while making such transaction.
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Thank you.
The TP provisions could be attracted in IT. But one needs to check who is having control in Dubai Co, charter documents needs to be examined. If TP is applicable, the transactions needs to be at ALP.
The TDS would be applicable plus 15CA and CB needs to be filed.
Also there will be GST on reverse charge basis to be paid by the recipient of services.
TP laws should apply in case same person holds at least 26% in both the companies. You may have to see the TDS provisions and the GST on reverse charge applicable to the Indian Co.
